Toronto, Ontario, April 29, 2025 – First National Financial Corporation (TSX: FN, TSX: FN.PR.A, TSX: FN.PR.B) (the “Company” or “FNFC”) today announced its financial results for the three months ended March 31, 2025. The Company derives virtually all of its earnings from its wholly owned subsidiary, First National Financial LP (“FNFLP” or “First National”), one of Canada’s largest non-bank mortgage originators and underwriters.
First Quarter Summary
- Mortgages Under Administration (“MUA”) increased 7% to a record $155.4 billion compared to $145.1 billion at March 31, 2024
- Revenue increased 2% to $528.9 million from $518.0 million a year ago
- Pre-FMV Income(1) decreased 16% to $52.6 million from $62.7 million a year ago
- Net income was $24.6 million ($0.39 cents per share) compared to $49.9 million ($0.82 cents per share) a year ago
Management Commentary
“First National converted a strong mortgage commitment pipeline and sizeable renewal opportunities into substantial volume growth in the first quarter,” said Jason Ellis, President and CEO. “Including renewals, total mortgage origination across our single-family and commercial mortgage portfolios increased $1.7 billion or 27% over last year, a reflection of customer activity in both markets and focused service efforts by our dedicated team. While we will benefit from these volumes in future periods, first quarter earnings were lower due to lower mortgage servicing revenue, falling overnight interest rates, planned technology and infrastructure investments and growth in direct securitization that delayed the recognition of income. This combination of factors presented a challenging backdrop. However, we are confident that the income and cash flow generated by our securitization and servicing portfolios will continue to support solid profitability going forward. Based on mortgage commitments taken in the first quarter, we also look forward to year-over-year origination growth in the second quarter.”
1 Earnings before income taxes and gains and losses on financial instruments (“Pre-FMV Income) is a non-IFRS measure that adjusts income before income taxes by eliminating the impact of changes in fair value by adding back losses on the valuation of financial instruments (except those on mortgage investments) and deducting gains on the valuation of financial instruments (except those on mortgage investments). See Non-GAAP measures.
Fourth Quarter Performance Review
| | | Quarter Ended
|
|---|
| | | | March 31, 2025 | March 31, 2024 |
| For the Period
| ($000's)
|
| Revenue
| | | 528,857
| 518,045
|
| Income before taxes
|
| | 33,019 | 67,892
|
| Pre-FMV Income (1) | | | 52,629
| 62,745
|
| At Period end
|
| Total assets
| | | 52,174,011
| 45,765,958
|
| Mortgages under administration
| | | 155,404,088
| 145,095,772
|
1 This non-IFRS measure adjusts income before income taxes by eliminating the impact of changes in fair value by adding back losses on the valuation of financial instruments (except those on mortgage investments) and deducting gains on the valuation of financial instruments (except those on mortgage investments). See Non-GAAP Measures.
First National’s MUA increased 7% to $155.4 billion at March 31, 2025 from $145.1 billion at March 31, 2024 reflecting growth in both single-family and commercial mortgage portfolios over the period. MUA increased at an annualized rate of 4% during the quarter. At March 31, 2025, single-family MUA was $95.7 billion, up 1% from $94.4 billion at March 31, 2024, while commercial MUA was $59.7 billion, up 18% from $50.7 billion a year ago.
Single-family mortgage origination (including renewals) increased 34% to $4.7 billion compared to $3.5 billion in the first quarter of 2024, reflecting a strong mortgage commitment pipeline entering 2025 and an even stronger renewal experience. First National’s MERLIN technology continued to support effective mortgage underwriting across the country.
Commercial segment origination (including renewals) increased 18% to $3.6 billion compared to $3.0 billion in the first quarter a year ago, reflecting strong demand for First National’s insured multi-unit property mortgage solutions.
First quarter revenue increased 2% to $528.9 million from $518.0 million in the first quarter of 2024. During the quarter, the Company generated:
Fourth quarter revenue increased 19% to $600.1 million from $503.4 million in Q4 2023. During the quarter, the Company generated:
- $53.1 million of net interest revenue earned on securitized mortgages (NII) compared to $54.1 million a year ago, a 2% decline despite 12% growth in the portfolio of mortgages pledged under securitization as residential segment NII was lower on narrower NIMs as high margin pandemic-era mortgages amortized down and Asset Backed Commercial Paper funding costs did not immediately fall with overnight rate cuts
- $45.9 million of placement fees, up 2% from $45.2 million a year ago due to a 22% increase in placement activity, partially offset by a shift in mix favouring renewed mortgages where per-unit fees are lower than on new residential origination
- $55.2 million of mortgage servicing income, compared to $56.6 million a year ago, a 3% decline reflecting lower third-party underwriting revenues and lower interest earned on escrow deposits
- $36.0 million of mortgage investment income compared to $31.3 million a year ago, a 15% increase primarily reflecting a larger balance of mortgages accumulated for securitization
- $1.6 million of gains on deferred placement fees compared to $5.4 million a year ago, a 70% decrease because of lower volumes for this program and much tighter spreads than a year ago
Of the $8.3 billion of originations in the first quarter, $4.9 billion was placed with institutional investors and $3.2 billion was originated for the Company’s securitization programs.
First quarter income before income taxes was $33.0 million compared to $67.9 million a year ago, reflecting changing capital market conditions. Pre-FMV Income(1), which excludes gains and losses related to financial instruments, decreased 16% to $52.6 million from $62.7 million in the first quarter of 2024. This change was largely attributable to: lower third-party underwriting income on lower volumes; narrower spreads on residential securitization, which reduced net securitization income; and, higher operating costs, particularly for technology which reduced earnings by about $1.4 million.
Outstanding Securities
At March 31, 2025 and April 29, 2025, the Corporation had outstanding: 59,967,429 common shares; 2,984,835 Class A preference shares, Series 1; 1,015,165 Class A preference shares, Series 2; 200,000 November 2025 senior unsecured notes; 200,000 September 2026 unsecured notes; and 200,000 November 2027 senior unsecured notes.
Dividends
Total common share dividends paid or declared in the first quarter amounted to $37.5 million compared to $36.7 million a year ago, reflecting an increase in the regular monthly dividend to an annualized rate of $2.50 per common share from $2.45 per share effective in December 2024. The common share payout ratio in the first quarter was 158% compared to 75% a year ago. If gains and losses on financial instruments are excluded, the common share dividend payout ratio would have been 98% this year compared to 81% in the first quarter of 2024.
First National paid $0.9 million of dividends on its preferred shares in the first quarter of 2025 compared to $1.0 million in the 2024 first quarter.
First National, for the purposes of the Income Tax Act (Canada) and any similar provincial legislation, advises that its dividends declared will be eligible dividends, unless otherwise indicated.
Outlook
In the short term, the Company expects increased year-over-year single-family originations in the next two quarters as continued strength in new commitment activity has resulted in a larger pipeline compared to early 2024. With 5-year fixed mortgage rates already 0.85-1.00% lower than a year ago and the Bank of Canada expected to resume cutting overnight rates over the next six months, housing activity may prove resilient. This outlook, however, must be considered alongside the uncertain and potential negative impact of U.S. tariffs. Management believes the imposition of U.S. tariffs may have an unfavorable impact to the Canadian economy and, in particular, employment. The impact may also increase the risk of recession in the country.
As indicated above, the Company continued to see year-over-year growth of single-family mortgage commitments in the first quarter of 2025 and, accordingly, management expects second quarter origination volumes to exceed those from the same quarter last year. For its commercial segment, the Company anticipates steady new origination volumes as government incentives support the creation of multi-unit housing and mortgage rates come down with expected BoC rate cuts. These initiatives, including the increase in the Canada Mortgage Bonds program from $40 to $60 billion, not only enhanced the level of financing available for multi-unit mortgages, but also removed uncertainties about such programs in the future. These developments have created a reliable and stable source of funds for the Company to originate CMHC insured multi-unit mortgages. However, with the increased certainty of these programs, other lenders have entered this market, and this competition has moved spreads tighter from the levels available in the first half of 2024. In both business segments, management is confident that First National will remain a competitive lender in the marketplace.
First National is well prepared to execute its business plan and is confident that the strong relationships it has with mortgage brokers and diverse funding sources are enduring competitive advantages. In 2025, the Company expects to continue to enjoy the value of its goodwill with broker partners earned over the last 35+ years. With diverse institutional investors relationships and solid securitization markets, the Company also has access to consistent and reliable sources of funding.
Going forward, the Company will generate income and cash flow from its now $45 billion portfolio of mortgages pledged under securitization and $107 billion servicing portfolio while focusing on the value inherent in its significant single-family renewal book.
Conference Call and Webcast
April 30, 2025 10:00 am ET | (888) 699-1199 or (416) 945-7677
www.firstnational.ca |
A taped rebroadcast of the conference call will be available until May 7, 2025 at midnight ET. To access the rebroadcast, please dial (888) 660-6345 or (289) 819-1450 and enter passcode 40607 followed by the number sign. The webcast is archived at www.firstnational.ca for three months.
Complete consolidated financial statements for the Company as well as management’s discussion and analysis are available at www.sedar.com and at www.firstnational.ca.
About First National Financial Corporation
First National Financial Corporation (TSX:FN, TSX:FN.PR.A, TSX:FN.PR.B) is the parent company of First National Financial LP, a Canadian-based originator, underwriter and servicer of predominantly prime residential (single-family and multi-unit) and commercial mortgages. With more than $155 billion in mortgages under administration, First National is one of Canada’s largest non-bank mortgage originators and underwriters and is among the top three lenders in market share in the mortgage broker distribution channel. For more information, please visit www.firstnational.ca.
1 Non-GAAP Measures
The Company uses IFRS as its accounting framework. IFRS are generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011. The Company also refers to certain measures to assist in assessing financial performance. These “non-GAAP measures” such as “Pre-FMV EBITDA” and “After tax Pre-FMV Dividend Payout Ratio” should not be construed as alternatives to net income or loss or other comparable measures determined in accordance with GAAP as an indicator of performance or as a measure of liquidity and cash flow. Non-GAAP measures do not have standard meanings prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers.
Reconciliation of Quarterly Determination of Pre-FMV Income1
($000s, except per share amounts)
| Income before income tax for the Period | Add/ deduct Realized and unrealized losses (gains) | Deduct (losses), add gains related to mortgage investments | Pre-FMV Income for the Period (1) |
2025 |
First quarter | $33,019 | $19,610 | $— | $52,629 |
2024 |
Fourth quarter | $85,579 | ($10,760) | $— | $74,819 |
Third quarter | $49,689 | $25,565 | $— | $75,254 |
Second quarter | $73,490 | $4,008 | $— | $77,498 |
First quarter | $67,892 | ($5,147) | $— | $62,745 |
2023 |
Fourth quarter | $59,895 | $16,894 | $336 | $77,125 |
Third quarter | $113,830 | ($18,435) | $61 | $95,456 |
Second quarter | $121,544 | ($31,690) | $— | $89,854 |
Forward-Looking Information
Certain information included in this news release may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will, "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management's future outlook and anticipated events or results, and may include statements or information regarding the future financial position, business strategy and strategic goals, product development activities, projected costs and capital expenditures, financial results, risk management strategies, hedging activities, geographic expansion, licensing plans, taxes and other plans and objectives of or involving the Company. Particularly, information regarding growth objectives, any future increase in mortgages under administration, future use of securitization vehicles, industry trends and future revenues is forward-looking information. Forward-looking information is based on certain factors and assumptions regarding, among other things, interest rate changes and responses to such changes, the demand for institutionally placed and securitized mortgages, the status of the applicable regulatory regime and the use of mortgage brokers for single family residential mortgages. This forward-looking information should not be read as providing guarantees of future performance or results, and will not necessarily be an accurate indication of whether or not, or the times by which, those results will be achieved. While management considers these assumptions to be reasonable based on information currently available, they may prove to be incorrect. Forward looking-information is subject to certain factors, including risks and uncertainties listed under ‘‘Risks and Uncertainties Affecting the Business’’ in the MD&A, that could cause actual results to differ materially from what management currently expects. These factors include reliance on sources of funding, concentration of institutional investors, reliance on relationships with independent mortgage brokers and changes in the interest rate environment. This forward-looking information is as of the date of this release, and is subject to change after such date. However, management and First National disclaim any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.
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